Apple Ohio v. Rose Italian Kitchen Solon

223 N.E.3d 601

2023-Ohio-2880

APPLE OHIO, LLC, Plaintiff-Appellee,

v.ROSE ITALIAN KITCHEN SOLON, LLC, et al., Defendants-Appellants.

No. 112281

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Released and Journalized: August 17, 2023

Civil Appeal from the Cuyahoga County Court of Common Pleas, Case No. CV-20-934978.

Porter Wright Morris & Arthur LLP, Jill G. Okun, and McDaniel M. Kelly, Cleveland, for appellee.

Gallagher Sharp LLP, Richard C. O. Rezie, and Taylor M. Iacobacci, for appellants.

JOURNAL ENTRY AND OPINION

SEAN C. GALLAGHER, J.:

{¶ 1} Appellants Rose Italian Kitchen Solon, LLC ("Rose Italian"), and Burnt-wood Tavern Holdings, LLC ("Burntwood Tavern"), appeal the trial court’s decision to enter summary judgment against them and to award monetary damages to appellee Apple Ohio, LLC ("Apple Ohio"), without holding a trial by jury and/or evidentiary hearing on mitigation of damages. Upon review, we reverse the summary-judgment decision on the issue of mitigation of damages only, and we remand the matter to the trial court for the determination of whether Apple Ohio properly mitigated its damages. We otherwise affirm the decision to grant summary judgment on the claims.

{¶ 2} On July 17, 2020, Apple Ohio filed this action raising a claim of breach of contract against Rose Italian and a claim of breach of guaranty against Burntwood Tavern. Apple Ohio alleged that Rose Italian had defaulted on payments due under a sublease agreement and had failed to timely cure the default.¹ Apple Ohio also alleged that Burntwood Tavern failed to honor its obligations under a guaranty by failing to pay the amounts owed. Apple Ohio demanded judgment against each defendant and sought monetary damages.

{¶ 3} In their answer to the complaint, appellants admitted to the sublease agreement for the premises and the related guaranty. They also admitted to issues with payment, which they attributed to the COVID-19 pandemic, but they denied other allegations. Among their affirmative defenses, appellants specifically raised failure to mitigate damages.

{¶ 4} During the course of proceedings, Apple Ohio filed a motion for summary judgment and argued that the appellants’ breaches of their respective obligations had damaged Apple Ohio "in the amount of $410,083.23" and that the damages "will continue through the Sub-Lease’s expiration in October 2023." With regard to the affirmative defense of "failure to mitigate" that was raised, Apple Ohio argued that "Plaintiff owes Defendants no duty to relet the Premises under the plain, undisputed terms of the Sub-Lease."

{¶ 5} Section 15.2 of the sublease agreement addresses the landlord’s remedies in the event of default. Relevant to the mitigation issue, Section 15.2(c) of the sublease agreement provides as follows:

(c) If Landlord elects to reenter the Premises under subsection (a)(ii) above and takes possession of the Premises, Landlord may, but except to the extent required by applicable law or court order, shall not be obligated to, relet the Premises for a term, rate and upon such other provisions as Landlord deems appropriate. * * * If Landlord is unable to so relet the Premises, then Tenant shall pay to Landlord monthly on the first day of each month during the period that Tenant’s right to possession is terminated, a sum equal to the Rent due under this Lease for that month. If the Premises are relet, Landlord shall apply the rents therefrom first to payment of Landlord’s expenses incurred by reason of Tenant’s default, second, to payment of Landlord’s expenses of reletting * * *, and third, to payment of Rent due from Tenant under this Lease.

(Emphasis added.)

{¶ 6} In their opposition to the motion for summary judgment, appellants conceded that they vacated the premises and returned the keys, but they maintained that the language of the sublease incorporated the "applicable law" and that Apple Ohio had an affirmative duty under Ohio law to mitigate its damages. Appellants also presented evidence to support its argument that Apple Ohio failed to make reasonable efforts to mitigate its damages. In its reply, Apple Ohio continued to maintain that pursuant to the terms of the sublease agreement it had no duty to mitigate by reletting the premises.

{¶ 7} The trial court summarily granted Apple Ohio’s motion for summary judgment, but initially did not render a damages award. As a result, the initial appeal to this court was dismissed. Apple Ohio filed a motion for entry of monetary judgment in the trial court. Appellants opposed the motion, again raised the issue of mitigation of damages, and requested a hearing on damages. Apple Ohio filed a reply in which it asserted it was entitled to an entry of a monetary judgment in the amount sought because its motion for summary judgment had been granted.

{¶ 8} The trial court granted Apple Ohio’s motion for entry of monetary judgment and awarded Apple Ohio the full amount sought. The trial court determined that "Plaintiff Apple Ohio LLC is entitled to judgment as a matter of law in the amount of $689,554.94 against defendants" Rose Italian and Burntwood Tavern. Appellants timely filed this appeal.

{¶ 9} Under their sole assignment of error, appellants challenge the trial court’s decision to enter summary judgment against them and to award monetary damages to Apple Ohio without a trial by jury and/or an evidentiary hearing on mitigation of damages.²

{¶ 10} Appellate review of summary judgment is de novo, governed by the standard set forth in Civ.R. 56. Argabrite ?. Neer, 149 Ohio St.3d 349, 2016-Ohio-8374, 75 N.E.3d 161, ¶ 14, citing Hudson ?. Petrosurance, Inc., 127 Ohio St.3d 54, 2010-Ohio-4505, 936 N.E.2d 481 ¶ 29. Summary judgment is appropriate "only when no genuine issue of material fact remains to be litigated, the moving party is entitled to judgment as a matter of law, and, view- ing the evidence in the light most favorable to the nonmoving party, reasonable minds can reach a conclusion only in favor of the moving party." Id., citing M.H. ?. Cuyahoga Falls, 134 Ohio St.3d 65, 2012-Ohio-5336, 979 N.E.2d 1261, ¶ 12; Civ.R. 56(C).

[1–3] {¶ 11} Also, the interpretation of a written contract is a question of law that we review de novo. Boone Coleman Constr., Inc. ?. Piketon, 145 Ohio St.3d 450, 2016-Ohio-628, 50 N.E.3d 502, ¶ 10, citing Arnott ?. Arnott, 132 Ohio St.3d 401, 2012-Ohio-3208, 972 N.E.2d 586, ¶ 14. When interpreting a contract, we must give effect to the intent of the parties as evidenced by the actual language of the contract. See Transtar Elec., Inc. ?. A.E.M. Elec. Servs. Corp., 140 Ohio St.3d 193, 2014-Ohio-3095, 16 N.E.3d 645, ¶ 9, citing Skivolocki ?. E. Ohio Gas Co., 38 Ohio St.2d 244, 313 N.E.2d 374 (1974), paragraph one of the syllabus. When contract terms are clear and unambiguous, courts cannot, in effect, create a new contract by finding an intent not expressed in the clear language employed by the parties. Motorists Mut. Ins. Co. ?. Ironics, Inc., 168 Ohio St.3d 467, 2022-Ohio-841, 200 N.E.3d 149, ¶ 14, citing Alexander ?. Buckeye Pipe Line Co., 53 Ohio St.2d 241, 246, 374 N.E.2d 146 (1978).

{¶ 12} Here, pursuant to the clear and unambiguous terms of Section 15.2(c) of the sublease agreement, if upon default "Landlord elects to reenter * * * and takes possession of the premises, Landlord may, but except to the extent required by applicable law, shall not be obligated to, relet the premises * * * ." (Emphasis added.) Section 21.11 of the sublease defines "applicable law" and provides that "the rights and obligations * * * hereunder shall be governed by and construed in accordance with the laws and judicial decisions in effect in the State in which the Premises is located."³

[4–6] {¶ 13} Pursuant to applicable law in Ohio, "[a] lessor has a duty to mitigate damages caused by a lessee’s breach of a commercial lease if the lessee abandons the leasehold" and "the lessor’s efforts to mitigate must be reasonable[.]" Frenchtown Square Partnership ?. Lemstone, Inc., 99 Ohio St.3d 254, 2003-Ohio-3648, 791 N.E.2d 417, ¶ 21. "The duty to mitigate arises in all commercial leases of real property, just as it exists in all other contracts." Id. at ¶ 18. "Accordingly, barring contrary contract provisions, a duty to mitigate damages applies to all leases." Id. at ¶ 20.

[7] {¶ 14} In this case, we must give effect to the intent of the parties as evidenced by the actual language of the sublease agreement. The language expressly states that the landlord "except to the extent required by applicable law" shall not be obligated to relet the premises. The contracting parties specifically included an exception incorporating the applicable law. Reasonably construed, the exception incorporates the applicable law requiring a commercial landlord to make reasonable efforts to mitigate its damages, and there is no contrary provision in the sublease agreement that obviates the duty to mitigate.

{¶ 15} We are not persuaded by Apple Ohio’s arguments otherwise, and we find the cases cited by Apple Ohio do not involve the contractual language at issue. For instance, in Frenchtown Square Partnership ?. Nick Ents., Inc., 11th Dist. Trumbull No. 2020-T-0038, 2021-Ohio-663, 2021 WL 857734, the duty to mitigate was eliminated by a contrary contract provision in a lease that provided the landlord "has no duty to attempt to mitigate any damages" resulting from the tenant’s breach. Id. at ¶ 12. No such language appears in the sublease agreement herein. In G&E HC Reit II Parkway Med. Ctr., L.L.C. v. Drs. Ford & Soud, Inc., 8th Dist. Cuyahoga No. 107172, 2019-Ohio-791, 2019 WL 1077283, the lease included a contrary contract provision that provided the landlord the right to re-lease the premises to a third party "without waiving any right to claim against Tenant and without incurring any obligation to pay over to Tenant any amounts collected pursuant to rental." Id. at ¶ 34. Unlike G&E, the sublease agreement in this case requires the landlord to...